The number of property developers registered in Dubai has fallen by about 40 per cent in two months
Posted by 7starsdubai on January 29, 2009
The number of property developers registered in Dubai has fallen by about 40 per cent in two months, according to the Real Estate Regulatory Agency (RERA).
Some firms were weeded out as part of a “clean-up” by the agency because they were unlikely to start their projects, while others fell victim to the economic crisis.
Marwan bin Ghalita, the chief executive of RERA, said there were now about 500 developers registered in Dubai, compared with more than 800 in November.
“Some of the companies were registered but have now decided they don’t want to develop because of liquidity, which is a good thing,” he said. “And others were forced to cancel because we were sure that their developments would never be real.”
Mr Ghalita did not reveal which firms had been forced out of the emirate, but said company names would be released in the future. He also did not say whether any of the developers who were no longer registered had made any sales on their proposed projects.
The authority planned to trim the number of developers further through a new system that would rank them according to financial stability and market experience, he added.
The system is aimed at giving RERA greater control and reinforcing investor confidence in a sector hit by falling prices, fraud and contractual disputes.
“We will make the number even less. The [ranking] system will be ready very soon… the cleaning is going on,” he said. “So before people invest in a project, they will see what the rating of the developer is and will be able to base their decision on that.”
Not only were the number of developers falling, but those still registered with the authority were scaling back the number of projects in the pipeline, he added. More than 25 companies have cancelled projects since the global financial crisis hit Dubai’s property sector.
Only those with a strong sense for the market and its feasibility were expected to survive the downturn, he said.
“Some of them bought land and wanted to develop two or three projects, but are now just doing one.”
Investor confidence in off-plan projects has been harmed by several cases of developers failing to proceed, or not keeping promises, especially relating to projects launched before RERA was established in 2007.
RERA established a system of escrow accounts in July 2007, which are designed to ensure that money paid by home buyers is used on the specific project. Hundreds of property developments launched before that date enjoy no such protection.
Disputes over long-delayed projects have been exacerbated by the downturn, leaving hundreds of investors struggling to cancel contracts and get refunds on instalments already paid.
In an attempt to stem a wave of cancellations by buyers, RERA issued an interpretation of an existing law in November so that buyers who defaulted on a property purchase would forfeit 30 per cent of the price of the unit and 30 per cent of any payments on top of that.
It is also planning two new regulations that would make it difficult for property prices to overheat in the future. One proposed regulation would require developers to own all the land and to have built 20 per cent of the project before it could begin sales. The other proposed regulation would tie payment plans to construction milestones.
Last year, several high-ranking Dubai property executives and financiers were removed from office and arrested as part of a fraud investigation. Tamweel, the nation’s second-largest home-loan company, lost most of its management due to the investigation and yesterday announced 57 job cuts.
Earlier this month, RERA announced a regulation, drawn up with the Department of Economic Development, banning freelance property agents from operating in Dubai. The move is intended to improve transparency for property owners and tenants.
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